Submitted by: Group 3, Section S3 1. Anirvaan Ghosh 12DM-022 2. Dharma Teja 12FN-043 3. Jency John...
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Transcript of Submitted by: Group 3, Section S3 1. Anirvaan Ghosh 12DM-022 2. Dharma Teja 12FN-043 3. Jency John...
Submitted by: Group 3, Section S3
1. Anirvaan Ghosh 12DM-0222. Dharma Teja 12FN-0433. Jency John 12DM-0654. Sameer Doda 12DM-1265. Sarthak Mukkar 12IB-0416. Sourabh Dang 12FN-1337. Tripti Bansal 12FN-146
INFRATECH LIMITED DOWNGRADING
Was incorporated in 26th March 1993 as Lanco Constructions Limited, 24th Nov 2000 the Company name was changed to Lanco Infratech
LITL has been driving growth in the domains of (EPC), Power, Solar and Infrastructure over the last two decades
Successfully completed projects-Kondapalli (700mw) in AP, Udupi (2x 660 mw) Karnataka, Anpara (2x600mw) UP……..
LANCO Resources Australia has acquired Griffin Coal Mining Company &carpenter mine management, with capacity of 20 mtpa.
Became a listed entity in November 2006 following the IPO of shares.
ABOUT COMPANY
Financial DataFull Year Mar'12 RATIOS NP-Latest 4 Qtrs
FV BV CMP MCap NP EPS Div % Int. Cov EPS P/E Sep'12 Jun'12 Mar'12 Dec'11
Unit Curr. Unit Curr. Unit Curr. (Rs. Cr) (Rs. Cr) Unit Curr. Unit Curr. (Rs. Cr) (Rs. Cr) (Rs. Cr) (Rs. Cr)
1 14.9 14.74 3534.65 120 0.5 0 1.2 0 0 7.2 -47.39 -8.24 24.7
LANCO’s FallCRISIL downgraded LANCO credit rating to D from BB-/CRISIL A4+
Rs. 800 cr of debt obligation in 2012-13 with the overall debt of over Rs. 13,000 crore
Need Rs. 600 cr extra funds to meet working capital in 3 power projects
All these above funds requirement has lead to high interest cost
Continues to have large exposure to under-implementation projects
Lanco reported a net loss of Rs 455 crore for the first six months ended September
Legal battle with Perdaman Chemicals and Fertilisers Ltd & Griffin power over CSA
High raw material cost
Capacity growth at all plants done based on assumed coal linkage with Coal India
Under Utilization of capacity of power plant due to low fuel supply
Default from state-run electricity distribution companies
Power sector is in dire state of investment
Under capacity of Griffin coal block
Low power tariff
Behind The Scene
ANALYSIS
Lanco Infratech have an Bank exposure of over Rs. 9000 Cr.
Taking 4500 cr as base for calculation
We are not considering depreciation for calculation conveneince
Standalone figures taken to keep Indian operations as basis for comparison
Long term PLR in China is 4-6% p.a. With Lanco infratech having low a D/E , we assume interest rate of 4% p.a.
Corporate tax rate is 30%
Analysis has been conducted only for one year
Operating Margin CAGR for Lanco Infratech is 15.5%
ASSUMPTIONS:
PROFIT & LOSS STATEMENT 9/30/2012 6/30/2012 12-Mar 11-Mar 10-Mar 9-Mar 8-Mar
Operating Profit 521.37 585.66 648.57 818.65 866.29 567.12 314.32PBDIT 533.78 662.83 712.83 830.12 977.81 582.18 342.35Interest 314.39 769.13 505.12 337.74 197.94 138.61 34.47PBDT 219.39 -106.3 207.71 492.38 779.87 443.57 307.88
Depreciation 279.87 255.36 101.44 72.06 59.77 40.53 11.62Other Written Off 0 0 0 0 0Profit Before Tax -60.48 -361.66 106.27 420.32 720.1 403.04 296.26
Extra-ordinary items 0 -0.59 0 0 0.83PBT (Post Extra-ord
Items) -60.48 -361.66 106.27 419.73 720.1 403.04 297.09Tax 62.59 21.83 -9.41 141.41 233.72 138.17 96.91
Reported Net Profit -123.07 -383.49 115.67 278.32 486.38 264.87 200.18
Debt-Equity (1.25) 1.14 0.99 0.81 0.55 0.24Interest Cover (4.67) 1.21 2.24 4.64 3.91 9.62
FINANCIAL LEVERAGE
2.433018825 3.431852 1.685933628 1.253812 1.312487319 1.1119592
FINANCIALS
CURRENT
Amount (Rs.
Crores)Proportion Cost Weighted
Cost
DEBT 4221.26 0.540 12.50% 6.7494
EQUITY 3596.53 0.460 18.40% 8.4648
TOTAL 7817.79 WACC 15.2143
CAPITAL STRUCTURE
CAPITAL ASSET PRICING MODEL
Beta Risk free return Average market return
2.4655 8% 12.20%
COST OF EQUITY: 18.4%
OPTION 1. Equity Infusion Either Through Fresh Equity Or Stake
Dilution
• Additional equity: Rs. 4500 cr.• Interest: 527.6575 • D/E : 0.52137
FINANCIAL MIX OPTION
Amount (Rs.
Crores) Proportion Cost Weighted Cost
DEBT 4221.26 0.343 12.50% 4.2837
EQUITY 8096.53 0.657 18.40% 12.0944
TOTAL 12317.79 WACC 16.3781
OPTION 2. Issue Zero Coupon Bond For 5 Year
• Bond value : Rs. 4500 cr.• Interest: 527.6575 • D/E : 2.42491
FINANCIAL MIX OPTION
Amount (Rs.
Crores) Proportion Cost Weighted Cost
DEBT 8721.26 0.708 6.05% 4.2837
EQUITY 3596.53 0.292 18.40% 5.3724
TOTAL 12317.79 WACC 9.6561
OPTION 3. External Commercial Borrowing From CDB @ 4%
• Bond value : Rs. 4500 cr.• Interest: 707.2942 • D/E : 2.42491
FINANCIAL MIX OPTION
Amount (Rs. Crores) Proportion Cost Weighted Cost
DEBT 8721.26 0.708 8.11% 5.7421
EQUITY 3596.53 0.292 18.40% 5.3724
TOTAL 12317.79 WACC 11.1145
Option 1 Option 2 Option 3
Operating Profit 750 750 750
Interest 527.65 527.6 707.2942
Profit Before Tax 222.35 222.4 42.70581
Tax @30% 66.705 66.72 12.81174
Reported Net Profit 155.645 155.68 29.89407
PREFRENCE DIV 0 0 0
Earning fro shareholder 155.645 155.68 29.89407
NO. OF SHARES 539.7 241 241
EPS x10 2.88392 6.459751 1.240418
FINANCIAL LEVERAGE 3.37306 3.372302 17.56201
DEBT- EQUITY 0.52137 2.42491 2.42491
WACC 3.8944 5.7972 19.9869
FINANCIAL LEVERAGE, EPS, WACC & D/E
Option 1, has highest cost of capital, but scores well in other parameters
Option 2, in our opinion is the most suitable alternative
Option 3, will lead to highest financial leverage & high enough cost of capital. But considering the fact that large principal amounts to 2 billion USD. Hence it cannot be ruled out.
Our Summary & Recommendations
Fresh funds through cheap ECB
Raise funds through stake sales & refinancing maturing debt
To maintain regular coal supply lanco is enchancing Griffin coal capacity.
Central Government support
Tariff increase by State Electricity boards
Won the case in Australian courts enabling the company to revise its coal supply agreement (CSA) with Griffin Power
High operational Excellency
Mitigation Measures
http://crisil.com/ratings/ratings-rationales.jsp
http://www.capitaline.com/user/framepage.asp?id=1
http://www.moneycontrol.com
http://www.moneycontrol.com/news/business/lanco-infra-may-look-at-stake-sale-option-for-new-projects_803330.html
http://www.dealcurry.com/20121126-Lanco-Infratech-To-Raise-Funds-From-Chinese-Banks-And-FIs.htm
REFRENCES